Soriano y Cia. v. Collector of Internal Revenue
REITERATIONFacts
The Antecedents: Petitioner A. Soriano y Cia. (Soriano) acquired surplus goods, including 57 tractors, from the Foreign Liquidation Commission in 1947 as consideration for rehabilitating the Veterans Administration Building. Soriano stored and reconditioned some of these tractors in its yards. United Africa Co., Ltd. (United Africa), through its representative Hugh Watson Gibson, contracted to buy these tractors from Soriano, with delivery to be f.a.s. (free alongside ship), Manila. A tractor expert, Tex Taylor, employed by United Africa, inspected and selected the tractors. Tractors found defective were reconditioned by Soriano. Payment was made through Philippine Refining Company, Inc., an affiliate of United Africa, via dollar deposits in Manila banks. Soriano delivered the tractors to the pier in Manila for shipment to East Africa. A portion of the purchase price was reimbursed to United Africa due to defects upon arrival in Africa. Procedural History: The Collector of Internal Revenue assessed Soriano for sales tax and surcharge on the gross sales of the tractors. The Board of Tax Appeals affirmed this assessment. The Petition: Soriano seeks review of the decision, questioning its liability for sales tax on the gross sales of the 57 tractors.
Issue(s)
Whether the petitioner is considered an 'importer' of the surplus tractors acquired from United States military bases. Whether the sale of the 57 tractors to the United Africa Co., Ltd. was consummated in the Philippines, thereby subjecting it to the sales tax under Section 186 of the NIRC.
Ruling
The Supreme Court affirmed the decision of the Board of Tax Appeals, holding petitioner A. Soriano y Cia. liable for the payment of sales tax and surcharge. The Court ruled that the sale was consummated within the Philippines, making it subject to Philippine sales tax.
Ratio Decidendi
On Issue 1: The Supreme Court held that the petitioner is an 'importer' for tax purposes. Reaffirming the rulings in Go Chen Tee v. Meer and Saura Import and Export Co. v. Meer, the Court stated that any person who acquires title to surplus equipment located in United States army bases or installations within the Philippines and subsequently brings them out of those bases is an importer. The military bases are treated as outside the ordinary customs jurisdiction; hence, moving goods from the bases into Philippine territory constitutes importation. Under Section 186 of the National Internal Revenue Code (NIRC), the tax is levied on the 'original sale' made by the manufacturer, producer, or importer. As the petitioner brought the goods into Philippine territory for sale, it satisfied the legal definition of an importer. On Issue 2: The Court ruled that the sale was consummated in the Philippines, as title passed at the pier in Manila. Applying the rule in Behn, Meyer & Co., Ltd. v. Yangco, the Court noted that in 'f.a.s.' (free alongside ship) contracts, property passes upon delivery at the wharf or dock. The evidence showed that the buyer's expert, Tex Taylor, only had the authority to inspect the condition of the tractors, not to accept legal delivery at the bases. Furthermore, the petitioner bore the delivery charges and risks until the tractors were placed alongside the vessel at the Manila pier. Since the transfer of ownership occurred within Philippine jurisdiction, the situs of the sale is the Philippines. The Court also emphasized that the repeal of the consignment tax (Section 187) did not affect the sales tax (Section 186), as the latter remains applicable to all domestic sales regardless of the buyer's intent to export the goods.
Main Doctrine
A sale of goods within the Philippines, even if intended for export, is subject to Philippine sales tax if title to the goods passes to the buyer within the Philippines. The seller is liable for the sales tax, not the buyer who intends to export.